congressional budget office director, phillips whale, testified on his agency's updated budget report. the cbo director also provided an economic outlook for the country. this house budget committee hearing is about two hours, 15 minutes. >> good morning and welcome to the budget committee's hearing on the congressional budget office's budget and economic output, outlook. at the outset, i ask unanimous consent that the chair be authorized to declare a recess at any time. without objection, so ordered. now, before i welcome our witness, i will go over a few housekeeping matters. today, the committee is meeting virtually. before we begin, i would like to remind members participating in this proceeding to keep our

camera on at all times, even if you are not under recognition by the chair. members may not participate in more than one committee proceeding simultaneously. if you choose to participate in a different proceeding, please turn your camera off. members are responsible for their own microphones. please mute your microphone's when you are not speaking. this will help prevent feedback and other technical issues. please remember to unmute yourself when you seek recognition. note that the chair or staff designated by the chair mute participants microphones when they are not under recognition, for the purpose of eliminating inadvertent background noise. we are not permitted to unmute members unless they explicitly request assistance. if i noticed that you have not unmuted yourself, i will ask if you would like staff to unmute you. if you indicate approval by nodding, staff will unmute your microphone. they will not unmute your microphone under any other conditions. i would like to remind members that we have established an

email inbox for submitting documents for and during committee proceedings. we have distributed that email, addressed to your staff. now i will introduce our witness. this morning, we will be hearing from doctor philip swagel, the director of the congressional budget office. i will yield myself -- for an opening statement. good morning, i wanted to thank dr. phillips whale, director of the congressional budget office, for appearing before our committee today to testify on cbos newly released budget and economic outlook. also known as the cbo baseline. doctor swindle, your agency isn't indispensable partner to congress. and to the house budget committee, and in particular, i want to thank all of your dedicated staff for their hard work and putting out this report. we are holding this committee hearing a little later in the

year than usual, since congress did not complete the fiscal year 2022 appropriations bill until march. in cbo needed those final funding levels to finish the outlook. today's hearing is still a great opportunity for us to examine cbos new projections for the next decade, as congress begins the -- 2023 budget and appropriations process. one comparing to cbos new outlook with the one published shortly after president biden took office. one thing is abundantly clear. the american rescue plan delivered critical, lifesaving and life-changing relief that changed the course of the pandemic, rescued our economy, and help american families and small businesses stay afloat. the american rescue plan -- the most equitable in recent memory. and contributed to the largest job growth ever in a calendar year. the percentage of people receiving unemployment insurance has now fallen below 1% for the first time in more

than 50 years. the unemployment rate is currently down to 3.6%, a level that prior to the rescue plan, cbo projected we would not reach during the entire decade. now, cbo is projecting that the unemployment rate will drop even further in 2023 to 3.5%, the lowest rate our country has seen in nearly 70 years. small businesses, which account for nearly half of all american jobs, are booming. americans submitted 5.4 million applications for new businesses in 2021, the most in recorded history. and small businesses are creating more jobs than ever before. the rescue plan nearly doubled our gdp growth in 2021, as a result, the u.s. was the first major advance economy in the world to come back and -- pre-pandemic levels of gdp. master economic growth has boosted our -- empowered record deficit

reduction. cbo projects we are on track to see the deficit shrink by 1.7 trillion from 2.8 trillion in 2021 to 1.1 trillion this year. all of these indications are evidence of the same truth. our economy is finally outpacing what's cbo projected without the rescue plan. the rescue plan laid the foundation for america's unprecedented recovery and i'm economic resilience, and we are in a far better place because of it. we've made incredible progress, but inflation is our new challenge. i will reiterate what economic experts across the ideological spectrum have said over and over, international supply chain bottlenecks at higher energy costs due to russia's war in ukraine are the primary drivers of current inflation. these are global problems, which is why inflation is a global issue. in fact, inflation in the uk hit a 40 year high just last week. the 38 member countries of the oecd are averaging an inflation

rate of more than 9%. clearly, this inflation is not unique to the united states, but the american rescue plan is. because we enacted this legislation, american families, state and local governments, and our national economy are facing this new challenge from the position of economic strength. with additional act -- to protect americans from rising costs, to keep our economy strong. the federal reserve is best positioned to tackle immediate inflation concerns and the congress can and must do everything it can to lower costs to american families overall. the cost of health care, housing, education, childcare, basic needs of american families, have been rising for decades. that's why house democrats have passed legislation to lower prescription drug prices, expand the supply of affordable housing, punch health care costs, expand access to higher education, to ensure that big corporations cannot take advantage of american consumers with the excessive price hikes. these actions would lower

families monthly cost substantially and i look forward to discussing this today with director swagel. this is an important hearing tend at an important time for the future of our nation. i hope that today, we can focus on the facts and on solutions that will deliver belief to american families and build a stronger, more equitable, and more resilient economy. doctor cycle, thank you again for appearing before our committee today. i look forward to your testimony. with that, i would like to yield to the ranking member, mr. smith, we will unmute for his microphone for five minutes for his opening statement. >> thank you, mister chairman. my opening statement probably couldn't be any more different than the comments you had just made. the budget and economic outlook released by the congressional budget office yesterday shows the impact of one party, democrat rule in washington, over the past year and it is not a pretty picture. in short, americas fiscal

health is getting worse. and when we compare it to cbos february 2021 baseline, you can see just how much the nation's budgetary and economic outlook has deteriorated since president biden and the one party democrat rule has taken over. first, let's look at the data. when president biden entered office, cbo predicted the government would spend 61 trillion over the next ten years. now they say it will be 72 trillion. when biden entered office, cbo predicted the government would run up just over 12 trillion in deficits over the next ten years. now they say it will be close to 16 trillion. when biden entered office, cbo predicted the government would spend 4.6 trillion on interest

payments over the next ten years. now they say it will be over eight trillion. when biden entered office, cbo predicted the average interest rate to be 2.5% over the next ten years. now they say it will be 3.5%. their prediction for this year has nearly doubled from 1.3% to 2.4%. the inflation forecast for 2022 and 2023 combined is 64% higher than what's cbo predicted when biden entered office. and that might be overly optimistic. after all, cbo projects inflation to be 4.7% this year. but inflation has already increased by almost 4% in 2022. also perhaps overly optimistic, cbos economic growth

predictions, real gdp growth, is projected to be 3.1% this year. but gdp declined by 1.4% in the first quarter of 2022. under every metric, president biden has worsened the balance sheet of the federal government. the economic outlook for our country and the physical health of american families. so, how did we get here? democrats passed their two trillion dollar american rescue plan, even though the economy was well on its way to recovery. democrats promised it would create 4 million jobs, instead, job creation was smaller in 2021 than cbo had projected it would be before the passage of the two trillion dollar plan. when it did create was the highest inflation in 40 years, while spending federal tax dollars on such things as $17 million on a golf course in florida, $4 million to build beach parking lots in south

carolina, $2 million to plant trees in new york, and 400 billion dollars to pay people to stay at home and not go to work. and yet, things could have been even worse. the washington democrats built back broke agenda would've added five trillion in new spending and three trillion in new debt, according to cbo. there is a silver lining in the cbo baseline, though. thanks to the republicans passed tax cutting jobs act, the tax burden on families and job creators fell, while federal revenues have grown. this year, revenue from corporations and individual taxpayers is up, far exceeding what's cbo projected the federal government would collect. revenues have surged 39% over last year and collections are on pace to be the largest share of gdp in american history. as a matter of fact, if current forecasts hold, revenues could very well and up being more than one trillion and a half

above what's cbo predicted they would be for 2022, after passage of the tax cut and jobs act. the story this baseline tells us is the story of one party, democrat rule, in washington. after one year, we have trained more and spending, and explosion of new debt, record inflation, a supply chain crisis in the highest gas prices ever recorded. and now, a baby formula shortage? this is the legacy of president biden's first year in office. i yield back, mister chairman. >> i thank the gentleman for his opening statement. in the interest of time, i ask that any other members who wish to make a statement submit their written statements for the record in the email box we established for receiving documents with -- committee proceedings. we've distributed that email address to staff. i will hold the record open until the end of the day to accommodate those members who may not yet have prepared written statements.

once again, i wanted to thank doctor suede for being here this morning. the committee has received here written statement and it will be made part of the formal hearing record. you have five minutes to give your opening remarks. you may unmute your microphone and begin when you are ready. >> thank, you chairman yarmouth. directing member smith and members of the committee for inviting me to testify on the cbo's budget and economic outlook. in the cbs projections released yesterday, the federal budget deficit in 2022 is one trillion dollars. that shortfall represents a substantial reduction from deficits in the past two years, as federal spending in response to the coronavirus pandemic wanes and as the current economic expansion continues. in our projections, which reflect the assumption that current laws governing federal taxes and spending generally remain unchanged, federal deficits nonetheless remain large by historical standards. and generally increased over the next decade. in 2023 to 2032, the annual

shortfall averages 1.6 trillion dollars. the projected deficit of more than two trillion dollars in 2032 at the end of the budget window, would equal 6.1% of gdp, that's well above the average of the past 50 years. that -- 23% gdp over the next ten years, raising interest rates, and accumulating that caused interest costs to double as a percentage of gdp by 2032. at the same time, that aging population and the rising cost of health care contribute to increase mandatory spending. in 2022, revenues and our projections reached their highest levels of the share in gdp in over two decades. they then declined over the next two years, but remain above their long term average through 2032. -- grow faster than revenues over that period, which is why deficits increase. the federal debt held by the public initially dips to 96% of gdp in 2023, and then rises after that. in our projections, the debt

ratio reaches 110% of gdp in 2032. that's the highest level ever. and then rises to 185% of gdp in 2052, at the end of our 30-year long term outlook. we infer our projections to follow the middle of the range of -- still, they are subject to considerable uncertainty in part because of the ongoing pandemic and because of other world events, such as the invasion of ukraine, and lockdowns to china, and so on. our estimate of the deficit for 2022 is now 118 billion dollars less than what we had projected last july in our most recent update before this one. in the current update, in the current estimate for 2022, revenues are 10% higher than we had previously projected. outweighs are up 6%. the cumulative deficit over 2022 to 2031 period is 2.4 trillion dollars more than it was last summer. newly-enacted legislations

since last july accounts for most of that increase. these other changes that boost projected, i'm sorry, that boost projected revenues and therefore reduce deficits, those are mostly offset by economic changes that increase outlays, particularly for interest payments and social security payments. let me now turn very briefly to the economy. the pace of inflation since the middle of last year has been the fastest in four decades. cbo's projections, elevated inflation persists in 2022 because of the combination of strong demand and restrained supply and the markets for goods, services, and labor. in response, the federal reserve tightens -- monetary policy and interest rates rise rapidly. real gdp, as gdp adjusted to remove the effects of inflation, gross by 3.1% this year and the unemployment rate averages 3.8% in our projections. after 2022, economic growth slows and inflationary pressures increase. so, the cbo has published a great deal of information. yesterday about our new

projections. those are online on the cbo website. dan, thank you again. i'm happy to answer any questions. >> thank, you director swindle, for your opening remarks. we will now begin our question and answer session. as a reminder, members can submit written questions to be answered later in writing. those questions and responses will be made part of the formal hearing record. any members who wish to submit questions for the record may do so by sending them electronically to the email inbox we've established within seven days of the hearing now we will begin our questioning i now recognize the gentleman from new york mr. jeffries for five minutes. >> thank you, distinguished chair, for continued leadership and for leading this hearing and director swagel, thank you for your presence and for the work that you do. i want to associate myself with the comments of chairman yarmouth, that he made clear that the american rescue plan rescued the economy at a time

when it was on the brink of collapse. and put us into position to achieve some of the significant economic growth measures that have occurred at this particular point in time, as well as the record unemployment. so, i just want to clarify some things that you have previously testified to. so, we've got a real understanding as to where things are at right now. i believe we've previously testified that revenues in the cbo's projections reached their highest level as a share of gdp in more than two decades, is that right? >> yes sir, that is correct. >> and in fact, they are projected to increase to 20% of gdp in 2022, which i believe is up about 17% from the previous forecast? >> that's right. the revenues will reach just slightly under 20%, which is up very substantially from our

previous projections. >> and we've seen approximately 8.3 million jobs created since president biden first took office, is that right? >> yes, employment has grown very sharply as the u.s. has come out of the pandemic, as you said, since the beginning of 2021. >> is it your understanding that 8.3 million jobs that created, that's a record in american history for a similar point in time, in terms of a president's new administration? >> yes, that would be the most jobs created in a single year since, you know, over 2021 the first year of the new administration. >> i'd like -- the number of people relying on number the lowest level since 1970? >> i'm sorry, the number of people collecting unemployment benefits, it's dropped very substantially. i don't know offhand if its lowest, but i suspect it might

well be, you know, with the rebound and the very strong, very tight labor market, we've seen a good outcomes, like you just mentioned. >> last year, how many new businesses were created in the united states of america? >> the rebound from the pandemic has led to a surge of business creation. you know, obviously, we saw business going out when the economy locked down and then a huge number have been created. i don't know the number of -- offhand, but this is a historic increase in business formation and entrepreneurship. >> it's my understanding that approximately 5.4 million new businesses were created in the last year. as you indicated, a substantial return of american entrepreneurship. in terms of deficit reduction, because my colleagues on the other side of the aisle, i, thought were deficit -- and cared about the deficit,

that's all we've heard about certainly during the tea party years. am i correct that in president biden's first year, the deficit was reduced by more than 350 billion dollars, is that correct? >> yes, the deficit is gone down very substantially, both, you, know from last year to this year and compared to what cbo had projected. -- new legislation that's been impacting. >> what's the projected deficit reduction for this current year that we are in? >> the deficit is falling by, i'm sorry, 1.8 trillion dollars lower. it's going from last year's about 2.8 trillion dollars to a deficit this year of one trillion dollars. that's a reduction of 1.8 trillion dollars from 20 21 to 22. >> so, thank you for your testimony. you know, for the life of me,

we certainly have issues that we need to be aware of, in terms of inflationary pressures which, as you've indicated, result from an increase in demand. that happens when you have a booming economy. and supply chain constraints, which happens when you have an economy that has to shut down as a result of a once in a century pandemic. these are challenges that mostly we continue to work on. we also continue to work on the issue as it relates to the baby formula shortage. i was shocked that so many of my republican colleagues chose to vote against the appropriations legislation that was brought to the floor. but for the life of me, i can't figure out the doom and gloom that is going to be painted by some of my republican colleagues. thank you for your testimony and in presenting the facts in a, straightforward fashion. i yield back. >> gentleman yields back, i now yield ten minutes to the gentleman from missouri, the ranking member, mr. smith.

>> thank you, mister chairman. to start here for the record, direct, or if you can give me these answers as quickly as possible, i want to try to get through as much as possible. but i want to hit on the deficit reduction that was just before you and the joke of the comments. i want you to clarify, is it true that the fiscal year 21 deficit was 517 billion higher than where the congressional budget office projected for the 2021 year? >> the deficit projection from last july to this one, yes, it's higher. >> so, that is not a deficit reduction. biden's two point 78 trillion dollar deficit in 2021 was the second highest in the history of america. driven in large part by his unpaid for two trillion dollar

american rescue plan. is that correct? >> yes, the emergency spending during the pandemic, including american rescue plan, drove the deficit last year, that is correct. >> and so, biden's claimed fiscal year 22, a one and a half trillion dollars in deficit reduction is only because last year, his inflationary two trillion dollar arp, american rescue plan, drove government spending to 30.5% of gdp. 10% higher than the historic average. his latest fiscal year 23 budget proposes annual deficits averaging 1.6 trillion a year. director, in february 2021, your baseline showed 61 trillion in government spending over the next ten years. you now say it will be 72 trillion, correct? >> yes, we that it's correct over the next ten years.

>> okay, so that's 11 trillion higher, correct? >> yes. >> so, in february 2021, your baseline showed it just over 12 trillion in deficits over the next ten years. you now say it will be close to 16 trillion in deficits, correct? >> yes, that is correct, yes. >> got it, so three and a half trillion more in deficits and in february of 2021, you said the first interest rate hikes would not come until 2024, correct? >> in our economic projection -- a year ago, that is correct. >> yes, okay, got it. of course, now we have seen the fed already increase rates twice in the last six months and in february 2021, you said the government would spend 4.6 trillion on interest payments over the next ten years. you now say it will be over a trillion, correct? >> that is correct. it's both interest rates are

higher and the amount of that has gone up as well. >> so based on every indicator, we are looking at here, the administration is failing the american people. your baseline projects inflation to be 4.7% this year. but inflation is already increased by almost 4% in 2022, making it highly likely we exceed 4.7%. to hit 4.7% inflation, we could not exceed 1% total for the remainder of the year. when were the gdp and inflation projections included in this baseline made? >> so, we locked our economic forecast at the very beginning of march. so, the work was mainly done in february than. as you said, inflation has turned out to be higher, even immediately, then we had forecasted. we see this especially in food prices and energy prices, i, mean all of us have seen the gasoline prices. some of that relates to the russian invasion of ukraine,

which we had, we had the beginning of it. the impacts have been much more. >> before the russian invasion of ukraine, inflation was up seven and a half percent, correct? >> yes, inflation last year was up very sharply. >> so, given that inflation continues to hover around a 40 year high, not to mention that inflation has gone up 11% since president biden came into office, if you were writing this baseline today, knowing what you know now, how would that affect your projections and assumptions? >> okay, as i said, it's inflation in the first couple months of the year has turned out to be higher than we expected. -- the current quarter that we are in his coming out around our projections. the fed is raising interest rates more, and -- had an impact on financial markets. so, these are just some of each that inflation has been higher than we anticipated, the feds i, can you know, probably as a result has been higher.

and of course, we've seen the impact of that on financial markets. >> would you expect that 4.7% to be a much lower than where we actually end up for the year? >> you know, we don't redo our forecast just because the way we do our -- >> okay, for the rest of the year we are going to be at 1%, to be able to get the four point -- >> to meet our forecast which, you know, there is a risk there. absolutely. >> so, we are clearly, i mean, i will tell you right now. if you all think we are going to be a 1% the rest of the year, i've got some oceanfront property in arizona to sell you, director. let me ask you about your economic growth projections. your budget says the economy will grow at 3.1% this year. but given that the most recent gdp report actually showed a decline of 1.4%, knowing what you know now, how would the current dismal economic numbers affect your projections? or are you sticking with it like you are the inflation

numbers? >> okay, again, the process we have, once we have the baseline, you know, that's locked down, we don't redo our forecast. as you said, the first quarter had negative gdp growth. you know, some of that we see on winding with, you know, changes in inventories and trade. you know, the outlook for the year is, based on people coming back into the labor force. about 1 million people still are on the sidelines, who we see as coming back and that's supporting, in part, the rebound that we see in the economics over the course of this year. >> so, we're congress -- let's ask this. your future year inflation projections are relatively mild compared to where we are actually currently at, with inflation. 8.3% and the most recent year tier cpi report.

11% since biden took office. but taking your projections for inflation, which assumes back to more normalized levels of 2% in a few years, what is the long term damage to the u.s. budget and economic outlook of even the so-called short burst in inflation, if it is actually short-lived? >> so, inflation has a number of effects on the economy and, of course, on the fiscal outlook. the key risk is interest rates. high inflation, leads to high interest rates. -- what's the fed is doing and through market reactions and then as the debt level has gone up, higher interest rates translate into higher net interest outlooks. you see that in our projection over ten years, net interest outweighs the shared gdp are more than doubling our projection. that is the fiscal -- risk of high inflation. it comes from high interest rates and high payments to service the u.s. debt. >> you know director, i'm a little concerned with some of

the proposals you selected in your alternative fiscal assumptions modeling. for starters, a lot of them seem targeted at tax relief republicans. when they want to continue to provide, which now has a proven track record of economic growth and historic revenue generation. in your alternative assumptions, you do incorporate, do you incorporate say, things that the majority has been very clear that they do not view as temporary, pandemic policies, and they want to continue? same things like the cause of continuing the student loan repayment moratorium indefinitely, canceling student loan debt altogether, a permanent extension of the child tax credit revision included in the american rescue plan that fell to include work requirements and let's say a continuation of the increased affordable subsidies that are set to expire. >> okay, so thank you for the

question and i know that this is extremely important to you and we are continuing to work on some of these issues. of course, we've done some work for you and for senator graham on these expiring provisions. we will continue to do that. what we have in the report is chapter five in the report is, you know, the alternative scenarios. essentially, we follow the practice in the past of looking at provisions such as the tax ones that you've mentioned that have been in place for several years and continue. the challenge for us was so much pandemic related provisions -- they were in the law for maybe a year and then expired, the child tax credits, as you mentioned, the expanded subsidies for the affordable care act. we did not, you know, of course we don't extend on at the baseline, since they're not encourage law. and then in these alternative provisions, we did not extend those either. you know again, because they are not in current law, they

are not scheduled to expire in the future. you know, it's analysis that we can do, of course, along with the j c t, to answer these sorts of questions that i know you are very focused on. >> thank you, mister chairman. >> chairman, you are on mute. >> mister chairman, you are still on mute. >> i hit, i'm sorry. i now yield five minutes the gentleman from california -- >> thank you very much, mister chairman. i am to associating myself with your remarks earlier about of the american rescue plan. i just want to remind all of my colleagues that this pandemic has taken over 1 million lives. i shudder to think what would've happened had we not passed the american rescue plan

and it has saved lives, and it's saved livelihoods. so, we cannot forget that in terms of the investments that were made. let me thank our director for being here and let me just go right into our questions because i think you are not going to ask about the department of defense. quite frankly, the only cabinet agency not to pass an audit. i have legislation that would require d.o.d. to pass an audit or face automatic spending cuts. so, how does d.o.d.'s failure to pass an audit complicate budget planning from an auditing point of view? how much pentagon spending is unaccounted for? why should this congress continue to add more and more money to the defense top line. in the meantime, if it can't be audited, if there is no accountability, what sort of forcing mechanism should we be considering in congress to get d.o.d. to pass an audit?

this is been supported by my colleagues on the other side of the house. what can we do? it's long overdue and you also filed the report how d.o.d. might save one trillion dollars over the next ten years. it concluded that we can better defend our country by getting more for less money. can you talk a little bit about that? >> yes, i would be glad to talk about this. the problems you are pointing to are a challenge for us as well. we aim for our baseline that we provided yesterday to inform policy makers, to inform you and your colleagues, and when the information that we get for the executive branches is imperfect, is a nice way of putting it, that means our baseline isn't as informative as it should be. and so, absolutely, we are there and better information from d.o.d. and from others would help us serve the congress with our mission. in terms of the defense budget going forward, you know, of course cbo does not provide

policy recommendations, but we have done a number of studies that help policy makers look at different choices for the defense. we recently put out a tool, it's actually online on different force structures that, you know, you, your staff can go through and say, we can change the services in different ways, what would be the physical implications of that? of course, we are not saying do this or do that, but you can see that basically how much money is saved by different choices on the national security -- ? >> let me ask you though, it has failed to pass an audit. what do we do? you know, if a business fails to pass an audit, it gets dinged. there are penalties. agencies have penalties. people have penalties. why does the defense department get away with unaccounted spending? it boggles my mind. there is no accountability

there, so i know you can't suggest policies, but tell me how inappropriate it is for our budgeting, process to go forward without a clear picture. i mean, we need to know what's, you know, a hand needs to be shown in terms of what you are dealing with. otherwise, it's not a good mechanism for us to make forecasts or for us to make decisions on our spending. if we let agencies just run amok with the resources that we appropriate. >> right and of course, most of the national security spending is appropriations. so, we support the appropriations committees in both the house and the senate as they take up the fy 23 appropriations. and you are absolutely right, the imperfect information means that we are not able to support them in the way that we need to. >> so, how do you audit? okay, so, what do you do?

what we are suggestions beyond any agency that is not audits -able? >> no, it's a difficult question for us because we provide information to the budget committees to enforce the budget. rules. and it's really more g.a.o. that does the auditing. of course, that's very substantial expertise in auditing. they would put forward policy recommendations. so they are the ones who would, you know, go out and say, here's how this situation can improve. >> well, okay, cbo baseline, it is a real shame and disgrace that you are not working together and you're not -- it impairs your ability to be accurate and forecasting if they don't insist on an audit. but the terms of the baseline dealing with inflation, how does the pentagon's budget assumptions fit in so that, in terms of cbos baseline? >> absolutely and essentially, it goes both ways.

the fiscal spending has a -- the decline in spending from last year to this year will alleviate some of the inflationary pressures going forward. but of course, it's in the other direction as well and inflation affects military spending, you know, the military is as i understand the largest -- energy costs will affect them as well. so definitely, there is an in fact on inflation and national security spending that goes in both directions. >> gentleman's time's expired and now you have five minutes -- mr. maclean tie. >> thank, you mister chairman. you know, i find it astonishing that the chairman -- as a success. even democratic -- like steve raskin or -- were warning that it was so irresponsible to trigger a crippling inflation. mister chairman, it turns out all the --

were actually very expensive and americans are paying them back every day at the grocery store, the guest station, tax collector, everywhere they spend money. i've seen a report causing average families about $5,000 for their purchasing power. my god, before the lockdowns, that took a wrecking ball to the economy. you know, we had the lowest unemployment rate in 50 years, the lowest poverty rate in 60 years. the fastest wage growth in 40 years and it was working class families gaining the most. the gap between rich and poor was actually narrowing for the first time in our lifetimes. we were energy independent for the first time in our lifetimes. inflation was around 1%, interest rates were near all-time lows. that did not happen my by accident. the republican tax cuts produced one of the biggest economic expansions in history and expansions were so great, we ended up taking more revenues after the tax cuts then we had received before them. we saw the biggest regulatory

rollback in history, that freed up american energy resources, brought companies back to america from overseas. all you had to do was continue those policies that produce this prosperity. and instead, you did the opposite. you spent trillions of dollars we did not have, you started with mr. biden's just calling it an incredible transition away from fossil fuels by imposing the highest gasoline prices in american history. you've admitted into our country and impoverished population the size of west virginia that american taxpayers have now support did, and you have the audacity to try to tell us that the economy is doing great? just a word of advice, you can't spin the economy. every person knows how the economy is doing because they are living it every day. that's what makes the old reagan questions so devastating to you and your party. are you better off today than you were four years ago? everybody knows the answer to

that in their own lives and they can see clearly who is responsible for it. you are not fooling anyone. >> mr. swagel, i want to begin with three numbers that describe the fiscal reality we face. 28, 76, and 89. according to ercot calculations, 28% is the growth in population and inflation combined over the past ten years. 28%. 76% is the growth in revenues, which means that revenues are growing at nearly three times the rate of inflation and the population of the past ten years, that's after the tax cuts. 89% is the increase in spending, and spending is a fine point of the matter. seems to me there are only three ways to pay for it. taxes, personal taxes, decrease of purchasing power of families in the present. business taxes are passed through to consumers -- higher prices to employees, lower wages, to investors and lower earnings. that's one way you can do it. second way is the borrowed from

capital markets, but of course, this reduces the capital available to finance the destruction and consumer spending, and home and automobile purchases, and business expansion, and of course, borrowings payback from the future taxes. and it generates additional interest costs along the way. the third way is to borrow from ourselves. essentially printing money, which is the direct cause of inflation. too many dollars -- to it follows then that it's excessive spending that is driving all three drags on the economy. to paraphrase the clinton era of action, it's the spending super. mr. swagel, am i missing anything? a, no. i think you've got it. the inflation we are seeing, it is a combination of a very strong demand, much that is driven by the fiscal policy. certainly, there is the recovery from the pandemic, combined with the supply constraints. those are driving inflation. >> let's talk about that

inflation for a second. 8.3%, as i understand it. does that mean, if i managed to put away $100,000 for my retirement fund, does that mean have just lost 80 $300 in purchasing power over the last year? >> that would be one implication. the number you gave us the most recent 12 months of inflation. it means that americans, nominal wages are up, but real wages are down for most americans. so, yeah, it's a challenge for families and a challenge for the economy, absolutely. a fiscal challenge as well. >> is the classic definition of inflation -- -- if you flood the economy with dollars, while you raise taxes on productivity, you get more inflation or less inflation? >> right, i mean, we have a very strong demand and you know, very serious constraints on supply. those dollars chasing the inadequate supply, that leads to hurt inflation. >> thank you.

>> gentleman's time is expired, i yield through the gentleman from california. >> doctor's waco, thank you for being here with us today. as a member of the waste means committee, i've made it my mission for years to lower the cost of prescription drugs. it's unconscionable that americans played the highest prices in the world for the exact same drugs. people with diabetes have to pay triple the cost for insulin, compared with those living in countries like canada. now, one in five seniors struggle to afford their medications. that's why so significant that when the house passed the budget reconciliation bill, it included provisions to lower prescription drug costs by allowing medicare to negotiate prices for high cost drugs. it also penalized drugmakers for hiking prices, faster than inflation. and it lowered out of caught pocket expenses for seniors.

it kept the price of insulin to $35, for those who are covered by insurance. while the cbo estimated that these provisions would result in nearly 80 billion dollars of -- medicare would reduce the federal deficit by nearly 300 billion. mr.'s waco, can you explain how these provisions would not only reduce federal spending but lower prescription drugs for americans. >> yes, of course. this is first from hr three, and then as you said, inside the bill better act. the provisions in the build back better act would set up a system of negotiation. between the secretary and drug companies. the secretary would have we, have done substantial modeling, working papers that explain the technical details. we find that it would lower drug prices, would lower drug prices and would have many

effects. some would be health. people take more medicine and have healthier impacts and save money on doctors and hospitals. the lower drug prices, would save money for the federal government because the cost of health insurance would be lower. the subsidized health insurance would have a variety of -- employers, aca, medicaid and others. the system in the bill, by lowering drug prices, which both make people healthier and save money for the federal government. >> thank you >> i would like to ask about paid family days. as you know, the u.s. is the only country among 41 nations that does not mandate any paid leave for parents according to data compiled by the organization for economic cooperation and development. democrats in the house tried to rectify that bypassing a national paid family and medically leave program. your analysis of that proposal found some important things. first, having access to paid family and medical leave could

improve physical and mental health for some workers. second, while some employers might reduce their company paid leave policies, and ship to the federal program, that is not a bad thing for workers. employees would still get paid leave, and you found that employers would increase pay or provide other benefits to attract good workers. could you expand on how a federal paid family leave program might help increase pay for workers? >> that is right, so we have done a lot of work on this including a sled of slides on this. paid leave would affect workers and affect the fiscal situation, and as you said, that might lead some people to come back into the labor market. people for whom are taking care of family members, or loved ones, parents. the availability of paid leave

will make it possible to come back into the labor market. for people already working, it would give them that flexibility, it might change the way they are compensated, there will be lots of different economic effects. we had that in -- the cost analysis for the build back better act, as passed by the house of representatives, we had that as costing the federal government 200 billion dollars over ten years. this is from 2022 to 2031. there will be at fiscal cost, as you said, there would be implications for families and for the economy. >> quickly, one of the drivers of increasing deficits and debt over the decade is the aging of the population. how would immigration reform helped keep our promises to our seniors? >> so, as you said, as the decade goes on, as we get into the long term outlook, the aging population becomes an important driver of the fiscal

challenge, both in social security and through medicare. in -- immigrants make substantial contributions to the u.s. economy, immigrants who are here and new immigrants who are working age and come in. they tend to pay into the trust fund, supporting sikh social security and medicare. the benefits would be off into the future. they booth grouch, they boost our society in other ways. it is up to policy makers, cv o does not inform policy recommendations. but increased act reckon -- immigration has many effects on the economy in the fiscal trajectory. >> thank, you i yield back. >> gentleman's time is expired. now we yield five minutes to the gentleman from wisconsin, mr. bob good. >> i could not find a ronald reagan quote in time. our forefathers didn't come here to copy europe. and i always run into people in

here, from england. they came here from germany, they came here from a variety of european nations. i'm sure occasionally somebody goes the other way, largely everybody wants to come here, and i would suggest that is in part because we have less government and government -- than it does in europe. i would like to talk a little bit about the overall level of spending and the effect of two bills, the american rescue plan, which i thought that was the most fiscally restless thing i've ever seen, and a bipartisan infrastructure bill. i think we already saw that we saw the cares act was excessive. i know it happened under president trump, it was initiated by treasury secretary mnuchin, who was a democrat. we but in any event, i would like to ask you, in your tenure deficit projections, how much

is the legislation enacted so far by this congress affected them? including the american rescue plan and the bipartisan infrastructure framework? >> absolutely, and i'm holding up the report, it's on page 30 of our report, figure to dash to. it goes through and shows the impact of the major legislation. so you can see, the early pandemic legislation, you know, especially the cares act was with contributing over two trillion dollars to the deficit last year. roughly half a trillion this year, and so on. and you can see in their, the american rescue plan acts also is over a trillion dollars in 2021, and then about 400 billion this year. now, since february 21, overall the legislation that has been acted has increased spending by

3.4 trillion dollars. of that 2.4 trillion was since our july 2021 update. so it's 3.4 trillion dollars in legislation since february 2021. >> already. >> that is right, and that is under current law. that would not include build back better, since it's not a part of current law. >> okay, i'll give you another question. there have been a lot of actions in the biden administration, and quite frankly i think the high unemployment, which began in the cares act, to a certain extent was extended by president biden. i think that encourages people not to work. you made the assumption, in your presentation today, that unemployment is going down because the pandemic is ending, and less people are sick, whatever. do you think part of the recent unemployment is going down is because we peeled off the excessively high unemployment benefits?

could not be one of the reasons people are getting back to work? they are no longer bribing people not to work? >> you know, that is certainly part of it. one of the things that we see today, as compared to our economic projections a year ago, is there's about 1 million with -- 1.1 million people who are still out of the labor market, who we thought a year ago would be back. -- >> how do you attribute that? government benefits? >> it is a mix. in part we think it is the effects of unemployment insurance and the transfers last year had some impact, it's also health concerns, it's childcare. i think we all understand that the federal government hasn't given clear guidance to childcare providers. it affects me and the 276 people i work with. here our childcare providers, it's just a -- >> i want to give you another question along that vein. since january 2021, the biden

administration sent hundreds of millions of dollars without congressional approval through various executive actions, a lot of these programs are programs that pay people not to work. it includes the s.n.a.p. benefits, about 250 billion, student law loan repayment moratoriums, dropping previous actions -- and welfare programs, which i think is clearly, you don't want people to work, you want them to be -- total cost of biden's executive actions could be half a trillion dollars or more. the budget a look provides information on how much the deficit is increased due to the laws put forward by congress. you should include how much it's increased due to the executive actions. >> we try to provide as much information as we can, some of this is in the baseline. you mentioned the food plan update, the increased snap benefits. that is in the baseline.

we roughly 225 billion over 2022 to 2032. this other executive action, we can't quantify it, there is the eo 13 nine 90, relating to the climate change, we just can't pinpoint where that enters into the budget. there's just not enough specificity for us to say, what is the impact on the budget? when we can, we certainly try to provide that information. sometimes it's just a little too vague to pinpoint. >> thank you for the extra time. >> that was doctor's wiggles answer. i now yield five minutes to the gentlewoman from the virgin islands, myth -- >> good morning, chairman

yarmouth and to the ranking member for holding today's hearing on the congressional budget offices budget and economic outlook. i would also like to extend my gratitude to director swagel, for appearing before us today and providing insight into the year's budget and an economic outlook. i believe cbo is invaluable to our work here in congress and the release of this report will help us begin the conversation on addressing fiscal issues. the national oceanic and atmospheric administration's climate prediction center recently announced that they are predicting an above normal atlantic hurricane season. the virgin islands, specifically, is still recovering from hurricane irma and maria. can you tell me how our climate related disasters and storms affect -- are expected to affect the federal budget and economic outlook? >> yes, representative, it's something that we've done a lot of work on and it's embedded in the economic baseline, that we

produced yesterday. we look at the effect of climate overtime, it affected the economy and physical situations, both through the effects of agriculture and construction. and then, through disasters, through wildfires, which are very important right now, and hurricanes. those both have a measurable impact that reduced gdp and therefore reduced revenues over the forecast. that is in our baseline. >> great, thank you for that. you know, we hear a lot of discussions surrounding inflation. and, it is of course something that congress cannot ignore, although we recognize that this is a global issue that is occurring. prices for groceries, housing, gas and other forms of energy are steadily rising. you saw the house recently passed the bill with no republican support, to lower gas prices by cracking down on alleged price gouging by energy

companies. the house and senate both passed versions of bipartisan u.s. competitiveness bill that will strengthen supply chains and lower costs for american consumers. what additional acts can congress take to mitigate the effects of inflation? we cannot just complain about it, we have to do something about it. i know that my side of the aisle is working steadily to do that. and we are trying to work in a bipartisan. what are some of the suggestions you have for us to do that? >> so, as who just preface what i will say, cbo, we provide analysis and not policy recommendations. i will give you some examples of supply constraints that are affecting inflation, and be aware that this is not my saying you should do, this it is just answering the question. >> i love your disclaimer, very smart. thank. you >> are the key to this organization is that we don't provide policy recommendations,

we don't tell members what they should do. but you know, the supply constraints. they are affecting the economy and the labor market and product market. one is tariffs. we have a right up of that in the report. tariffs are raising the price of many products, anything with steel, anything with aluminum, we have a tariff on infant formula that, you know, cbp, until recently was bragging -- bragging to keep out infant formula. obviously that's changed, but that's the tenement of trade policies. that is one, we talked about immigration before. i mentioned childcare. i think, you know, i'm speaking a little bit on behalf of cbo employees, getting clear guidance on childcare and the pandemic, and the virus, that would be helpful. and energy, you mentioned energy, those energy

transportation. you know, the jones act, it raises costs for transporting. -- goods and services and energy, it's part of the other provisions going to be taken. you know, sylvia wouldn't say what to do, but anything on the supply side would help reduce inflation. >> thank you, thank you very much for that answer. with so little time, i just want to yield back and thank you again, mister chairman, for this hearing and thank you so much to the witness for answering the questions and being a policy adviser, letting us know what policy affects those issues. thank you. >> thank, you gentlewoman yields back. now, recognizing the gentleman from pennsylvania, mr. smucker, for five minutes. >> thank you, mister chairman. i appreciate that, i want to concur with the comments of mr. maclean talk earlier. i found the comments by the chairman, with all due respect, and mr. jeffries to be

astounding. when they talked about the health of this economy. and i can tell you that it is not what my constituents are experiencing. they are experiencing massive price increases at the pump, they're making tough decisions about whether they can buy gas or go by food. they are deferring retirement, it goes on and on. i don't know that i've ever felt the comments that were so out of touch with what my constituents are feeling. and frankly, it's by democrats, they are in trouble in the upcoming elections because of that out of touch-ness that we're hearing today. the other thing i want to say, mr. swagel, the argument that you concurred with, in regards to ukraine causing the inflation, but that in the next sentence you admitted that inflation was 7.2%, or something like that, before ukraine started.

how can you -- how can you reconcile those two statements? >> okay, so it's an important question. inflation was high before the invasion of ukraine. -- >> it was not caused by ukraine. >> no, inflation was high. it ukraine shock was a global shock, now we see it around the world go up. >> but inflation here was not caused by ukraine, do you concur with that? >> absolutely. inflation was high in the u.s. before ukraine, it's gotten higher because of it though. >> yes, one of the thing you said, you talked about the classic economic formula. i'm not an economist, but you know, you increased a man, you decrease the supply, you're going to have inflation. that's what happened here, when you talking about when you say increased demand? >> so, increased demand, we think of that as spending by families, by households, by

businesses and the government. >> billions of dollars that was inserted by the government -- increased demand and cause inflation, correct? >> that would be certainly a contribution to it, the fiscal inflationary -- >> the biggest part of it, right? >> there is both, because you have -- >> so the american rescue plan cause the inflation that we were seeing now? >> it definitely contributed to it. the fiscal policy, -- the economy >> most economists that i talked to believe it was the primary factor in causing inflation. are you disagreeing? >> i'm not disagreeing, but i just want to say there is multiple -- >> sorry, i'm gonna keep going. >> of course. >> i think it's important that we come to an understanding about what has caused some of these disasters economically that we are in for our constituents. i appreciate you answering those questions. the democrats talk about

reducing deficits in this budget. in their budget. it is pretty bizarre when you look at the numbers. i want to see if you agree with me on this as well. they're estimating a 1.6 trillion dollars in average federal deficits over the next decade. is that right? >> that is right. that is the ten year average. >> do you know what the average was in the ten years prior to covid? we don't all know that there was an anomaly during covid, what was the average ten years prior to covid? >> i don't have it offhand, but just before covid -- >> it was 829 billion average. in the ten years prior, not even looking at any numbers going up and down. they are doubling in the ten years coming up compared to the ten years prior to covid. the year before covid, the deficit was 984 trillion. how could the democrats possibly credibly be saying that they are reducing deficits

in any way? >> the deficit is coming down this year, as the emergencies -- >> but it's only because we spent trillions of dollars. they spent trillions and trillions of dollars more, and now they take -- their claiming that they are reducing deficit. it makes no sense, i think everyone can easily see that. how concerned are you with the debt to gdp? can you give us a little bit of history about where we are in debt to our gross domestic product? >> right, so the debt to gdp ratio is just under 100 percent this year. >> how does that compare to the historical average? >> essentially it is right up there near where we were at the peak, when we were paying for world war ii. >> currently, it's projected to keep increasing, are you concerned about that? >> that's right. i am concerned that the debt ratio, by the end of the ten-year window, goes up 100 and 20% higher than ever, in

the service cost more than doubles. it goes up to 3.3% in gdp, just to do the annual servicing. that is with interest rates still pretty moderate by historical standards. >> that's why this budget is so irresponsible. thank you for pointing that out. thank you, mister chairman. >> joan's time has expired and now we recognize the gentleman from california, mr. peters for five minutes. >> thank you mister chairman, doctor swagel, thank you for being here. let's start with a good in this report, despite the havoc that the pandemic wreaked on our economy, it's fairly strong if you look at high wages and lower employment rates. in san diego, our unemployment rate since 3.5%. your testimony notes that the size of the labor force, which in early 2022 remained 1 million people below its pre-pandemic level, is expected to keep increasing, exceeding that level but the end of 2022. what's driving the recovery in the labor force participation

rate? >> you know, so it is a mix. it's gotta be a large part of that the reopening of the economy and scientific progress. progress with the virus, it's probably the tight labor market and lies in wages reeling people back in. could be high inflation pushing people who need more income to come back in as well. >> i suppose overtime, that will start to address some of the supply issues in the labor market that are driving inflation, do you agree with that? >> yes. that's what part of why we have inflation moderating over the next couple of years. >> let's turn to some of the bad things. inflation will remain elevated through 2022, the federal reserve will -- fight inflation. i can made the fed for doing that. at the same time we have to confront the consequences of rising rates. i'm serving as the vice chair of the new democrat coalition, i helped start an inflation working group, trying to find

solutions to ease inflation and ease the effects on families. i want to just note that you mentioned immigration, you have mentioned tariffs, i also note that my colleagues on the other aisle, when they had control of all three branches, they lowered taxes for wealthy people in the middle of a booming economy. i'm happy to work with any of my colleagues on anything they want to do on any of those things, fair tax system to cut back on the trump tariffs. and to deal with immigration, which they have left the building on. i hear a lot of criticism, but i don't hear from the other side of the aisle is the answers on what they would like to do about it. doctor swagel, based on the feds current trajectory, you predict inflation will slow in 2023 and 24, but spending on interest payments will grow each year for the next decades. can you describe in detail how interest payments will rise

over the next ten years and how that compares to -- as a share of our total budget? >> i can, so, interest rates rise both with higher interest rates and with the increase of debt. the challenge is that the debt level has gone up by so much, that even a pretty modest increase in interest rates will have and small effect. it's not immediate, because we're not funding u.s. debt with 30-day tea bills. there is some time periods over which the debt payments go up. 1.6% gdp for interest -- today, the 50 year average is like 2%. we are actually below the 50 year average, just because interest rates still remain moderate. that is the challenge that we are going up. 3.6% by the end of the ten-year window. both because the debt is going up, but also because interest rates are going up. interest rates, in our projection, they go up

moderately. in terms of interest rates, they're going up more than interest payments -- the challenge there will get even sharper. >> first of all, i'm concerned as a policy maker about continuing to spend more on interest than on the future of our children. other budget consequences for doing that? >> absolutely, so the choices you highlighted, that is the choice, we are going to pay the interest payments on our debt, and we since alexander home enten, that's part of the country. but other priorities, it means policy makers must put in place more revenue commissions. rising interest rates, rising death payments, we they pose a challenge and a choice for policymakers. >> mister chairman, i appreciate this hearing. i will just say to my colleagues on the other aisle, they all know that i'm interested in the deficit and working with them on the deficit. i did invite them to work with us on immigration, on the trump

tariffs, and on the tax system that funds this government in a way that is good for our fiscal health as well as for our children. with, that i yield back. >> gentlemen, yields back, and i yield five minutes to the gentleman from georgia, mr. -- >> thank you mister chairman. i want to deal with some of my colleagues, they've been talking about deficit. here, we have the 2021 deficit. the second highest in american history. 517 billion dollars over cbos estimate. yet, the biden administration is trying to tap this as a deficit reduction. i mean, honestly, and sincerely, seriously, do you think we're stupid? >> i don't think i should answer that question. >> well don't answer than, we are not. i will tell you. it is just ridiculous.

where we have the two point 78 trillion dollar deficit, it is almost three times the average trillion dollar ten year average deficit. and, yet they are saying that it is a deficit reduction. it just baffles me that somebody could possibly even think that or say that. let me ask you this, what was the largest contributor to deficit growth between last year's projection in this year's? >> well, there is some legislation that was enacted, both investment infrastructure and jobs act. and then the fy 22 appropriations that were passed earlier this year. that was new spending, it shows up this year, and that was offset by increased revenues. and then the pandemic related spending, that fell away.

so that is why the deficit falls from -- it was 2.8 trillion last year to one trillion this year. a combination of the pandemic spending falling away and some of increased revenues. >> let me ask you this, has the administration or the democratically controlled congress, either one of them, have they taken any steps to stabilize our debt, or to deal with a dramatic disparity that we are witnessing right now between our growing spending and the revenues that failed to cover that? >> i mean, the fiscal trajectory is challenging. and you know, that is the message of the report we released yesterday. choices need to be made. it's not that this year there's going to be a crisis, maybe not even by the end of the ten years, but of directory is challenging and we will drive the need for choices to be made. >> we all know that inflation

has gone up, every month, every month since this president has been in office. i guess you could make an argument that maybe it could take down a couple of points were tenths of a point last month, it went from 8.5 to 8.3. i can assure you it will go back up again this month. every, month when joe biden went to office, this president, the inflation rate was 1.7%. now, here we are at 8.3, 8.5%. you know, we don't have a revenue problem, we have a spending problem. how much do you think we need to reduce the deficit to stall inflation? >> so, of course some of that is in the works, with the reduction in the falling of pandemic related spending. the amount of contraction airy impulse that's needed to reduce inflation is going to depend on the success of the feds efforts

and on the supply constraints falling away. so it's not clear, i can't give you a single number of wet needs to be done on the fiscal side, because it depends on the fed and on what happens with the supply side. >> let me ask you something, inflation was at 7% in 2021, and 8.3% over the last 12 months. it's running out of 11% pace so far this year. the last time we experienced this kind of inflation, the affected interest rate on the debt was 10.8%. how does that limit our ability to reduce our debt? >> it is an important challenge, as interest rates go up, given the increase in the debt level, that means that the interest will rise -- and that is going to crowd out other things. or require action to raise revenues. so we have a pretty moderate increase in interest rates.

that already has a pretty substantial rise in spending, to certain extent. >> correct me if i'm wrong, but we had a 0.5% increase in interest rate, by the federal reserve, which resulted in 29 billion dollars in interest. an increase of 29 billion dollars interest. just like that. i don't think the interest rate isn't gonna go up again. it's probably gonna go up two or three more times. isn't that right? how much is going to cost us? >> right -- sorry, i'm out of time. what's it gonna take? what's gonna take to get people so tension? what's going on here? >> is that a rhetorical question? >> no, it's a real question. and maybe you can follow up and writing for me. tell me what it's going to take. i really need to know. mister chairman, i appreciate your indulgence. i yield back. >> the time is expired, we now recognize the gentleman from

pennsylvania, mr. boyle for five minutes. >> thank you, mister chairman. i know it's tempting to get into the partisan food fight and score points. i mean i use my precious five minutes they have with someone as esteemed as you for perhaps a better purpose. i'm struck, mr. swagel, whatever i'm with colleagues of mine, fellow parliamentarians from around the world, especially in europe, obviously right now the russian invasion an attack on ukraine is paramount, but a close second to that is every one of my colleagues, speaking about the inflation going on in their country. it is pretty much a worldwide issue. so hardly something we're dealing with in the u.s.. i was wondering if you could take a step back and maybe just give us the lay of the land internationally, and especially in other western democracies, and what inflation looks like

for those countries. >> okay, very good. i can speak to that. that affects the u.s. because the condition of foreign countries affects us both china and the lockdowns there, and also what it does to the supply side. and demanded other countries for the u.s. exports. other countries are suffering for the same factors that we are, i talked about it earlier, the ukraine related shock on food and energy, and of course europe is much more affected by the negative effects, the energy shock there. inflation has risen for all countries. for the u.s., you know, the u.s. is first. it does look like we had something different last year, a combination of the supply issues in the u.s., and the demand in the u.s.. it made us go first. and so, that is a factor. or, recently all countries are facing similar challenges together. >> my belgian colleagues tell me there is over 8%.

french parliamentarian who i'm friends with, i think pegged it at seven and a half. so obviously this is challenge worldwide. do you think that one of the lessons coming out of covid is we, you'll see this is a leading question, but something i've been pushing for for a number of years now. is to increase domestic manufacturing, both for economic reasons, but also in terms of our national security. do you believe now, coming out of the covid experience, the argument for that is strengthening, maybe you could talk about some other critical parts of our supply chain that we now realize are at risk and covid help exposed? it >> right, i can talk about a couple of things you mentioned. there's many dimensions to this. the closer you get to, it the more dimensions there are. it's fractal, that's the word for that. >> and so we've seen the supply chain issues that have

bedeviled the u.s. economy, even from the very beginning of the pandemic. and of course, items produced in the u.s., those supply chains have been more resilient, but even there, you know, issues with the labor supply have affected the u.s.. i think we all understand that some of the critical supply chains, like in medicine and other critical issues rely on foreign countries, it's difficult. not every foreign country is the same. there is an important discussion to be had there about the trade alliances. and then lastly, the infant formula, there is ample supply of safe and nutritious formula. it is the u.s. that has inflicted the problem on ourselves. so it is a different wrinkle on the supply chain. it's absolutely coming out of the pandemic, but i think we understand we need to focus on more as an economic impact, a fiscal impact, and it impact on

families. >> one thing, speaking to mr. stevenson, he believes that inflation is gonna be a challenge for the rest of the year, beginning to come down next spring. once it drops, it's dropping pretty precipitously. you talked about this back in the beginning, but i was wondering if you could kind of offer your thoughts on that timetable, do you agree, disagree? >> we have the supply issues facing the country. they are generally winning over the course of this year. i talked earlier about the labor supply, that's one. trade supply issues, the situation one of the key ports look to be getting better. the china lockdowns they don't yet to seems to be affecting the exports too much. that is supporting our -- inflationary pressures will diminish over the course of the year. of course, as we discussed a couple of times, the demand side pressure is driving

inflation will diminish as well, both from what the fed is doing and from fiscal policy, the pandemic spending falling away. >> thank, you it's always a pleasure to be with you. thank you. >> gentleman's time has expired, i now recognize the gentleman from virginia, mr., platform five minutes. >> thank, you mister chairman. i want to thank director swagel for being here today as well. despite the last update of inflation being 8.3%, cbs news economic baseline projects are rate of only 5.1% in this quarter. i think everybody would prefer if inflation really were only 5.1%. obviously, however, cbo is under estimating the level of inflation. we all know the assessment of our fiscal future is sensitive to inflation. you have inflation going down over the next year quite a bit. can you talk about, if

inflation does stay at the rates that we are seeing now, the impact that that would have on families, particularly those who are working on fixed incomes? >> absolutely. the inflation we see already poses an important challenge for families. family incomes just don't go as far. wages are up, nominal wages are up, prices are up five more. most americans over the past year have seen the real take home page though down. if that continues, as you say, that will continue to pose an important challenge for families. >> now, we are expecting federal deficits to exceed two trillion dollars by 2031 and 2032, going on in fertility. the president's budget does nothing to address these deficits going forward. does nothing to move us towards fiscal responsibility or balance in any way. this represents a huge crowding out of private investment and

economic growth. how would you say that that -- these recurring deficits are going to impact the fiscal futures for american families as well? >> it is through the mechanism that you highlight, it is an important one. the deficit, and over time, as it makes this larger, it crowds out private spending and investments. it leads to higher interest rates that otherwise affect american businesses, american families, job creation, affects productivity. you know, this is -- the forecast is not a crisis. we don't have a recession in our forecast. but it is more like a slow undermining of the foundation of success for the american economy. >> cbo is also expecting the feds to produce folding's of federal dread by rapidly too -- this would also contribute to that crowding out by the investment. the last time the debt promised to reduce tilting of federal

debt, it only off-loaded 750 billion, leaving its assets 300% larger than before the 2008 financial crisis. do you really think that the fed will reduce its assets by this much and stop facilitating massive federal deficits? >> so, in our economic forecast, we have the fed, as you said, reducing it's asset holdings, going from quantitative easing to quantitative typing. that is moving up -- this is by design, it's trying to reduce demand and economy to reduce inflationary pressures. but you know, that has an impact, it has an impact on families and businesses. you know, the challenge of the fed is getting that right and reducing inflation, without excessive negative effects on families and businesses. >> you know, the government is repositioning and implementing more of this pseudo-socialist

ideology that the current administration and congressional leadership is promoting. the government right now spends $4 on wealth redistribution for every dollar that it spends on government services. this uptick represents, as i said, a decades long shift of government moving closer to this pseudo-socialist dystopia of the left. does the cbo have position on this trend and increasing use of government to redistribute wealth as opposed to supporting economic growth? >> okay, i would say that the transfers that you're pointing to are part of the fiscal challenge, as you go up further, we have debt to gdp going to 100 and 10% by the end of the ten-year window, 285% out and 30 years. that is driven overwhelmingly

by mandatory spending, social security and medicare. cbo does not have a position on with the right spending is, how much or how much. the budget earth me take is the fiscal challenges being driven by mandatory spending. >> does the budget do anything to address this issue in mandatory spending? >> the projection's current law. the current law has this challenging fiscal -- >> and that's the greatest tragedy of this administration. i yield back. >> the gentleman's time is expired, we now recognize the gentleman from iowa, mr. -- for five minutes. >> thank, you chairman. and ranking member smith. and 32 of your analysis, you mentioned that the aspiration -- other 2017 tax act, including -- effecting individual income taxes -- projected to slow down

growth. that is a concern to me. you project after 2025, your projection considers the damage and -- increase in federal -- could you answer that? director swagel: we have analysis showing the impact of the 2017 tax act. and the expiration of the individuals i provision. -- site provision. reducing growth and job creation. that -- >> that is very significant if those tax cuts go away. this could be a reduction in economic growth. director swagel: in our

baseline, we assume the fed would react to it and cut rates. that is why there is a bond is so we are anticipating the fed would react to it and see it coming. >> like you said that. there will be an economic impact. i will transfer -- transition to the forecast. have a real problem and i understand cbo is required by law to assume that the trust fund will make payments. after one waste -- page 120 -- i would trust funds are projected to increase debt by 14 trillion over the next 10 years. can you explain to the committee

that -- the series of not mitigating this bending cost programs and a catastrophic effect that could exist if we do not start these programs. director swagel: the trust funds represent the physical challenge snapping over the horizon. the treasury has to raise revenue just the same way it does as funding. the table b -- table b two on page 127, that shows the deficit and pack of the trust fund over the next 10 years. early -- >> this is serious and the administration is not -- it is something we have to get rrs around. you stated that the u.s. economy

attracted 1.5% on the annual basis in the first quarter of this year, the downgrade revision of the gdp seems contrary. it was -- noted that the contraction was contributed to the u.s. spending imports with producing exports on domestic goods. here administration has showed that trade is not a priority. sent effectively completed any unite lateral or bilateral trade deals. can you explain how critical trade is to our economic growth? >> is a great part of our economy. it is an important factor. we see some of that online for the rest of the year. over time, trade is a critical

factor in the u.s.. also, boosting productivity. larger markets mean free-trade to help america's -- american first. a variety of our american health -- households can boost choice. >> trade is critical and it does not seem like this administration has a handle on it it is not doing any bilateral or unilateral trade deals. thank you. >> recognize the gentleman from virginia. >> you for your testimony, dr. swagel. as for your appearance. i find it interesting that not many -- many of the members of the majority to participate today to defend the disasters

economic record this administration and the proposed budget exacerbates the problems we have. the only calls for bipartisan city -- bipartisanship -- is on this hearing. director swagel, if democrats were trying to ruin the economy, what would with fast they have done differently on spending and energy and pain people not to work and growing the welfare state and firing people for not getting vaccines, closing are making it hard for businesses to operate -- considering other covid mandates. what might you do differently if you are trying to ruin the economy over the past year and a half? director swagel: our baseline, you can see the effect of the supply challenges that are taking -- taking the economy. it was a labor force

participation, it not coming back, and in part that was part of health reasons. that was of course -- support letters apply -- greater supply. >> i can't imagine you would do anything differently if you are trying to ruin the economy that they have done in the past year and a half. i'm much worse off if you were -- would be if they passed the unprecedented $5 trillion. >> want to evaluate the merits of policy. -- we will not evaluate them out -- merits of policy. under current law and the additional spending was on the direction of deficit reduction and it could have implications for inflation -- it is widely understood that the lower

deficit means fiscal constraints and in choosing inflation. additional spending would go in the other direction. >>'s for breaking down the deficit. i know others have talked about it but the administration's claim that deficit reduction, a trillion dollars or so they will not stop spending. they will be -- try to get more of the build back bankrupt plan -- think it is fiscally responsible to overspend by a trillion dollars even to where they are projecting right now? >> the deficit is large under current law and that has a current economic step. there is higher inflation and

wider deficit would make this challenge greater. >> the state of the union, the president said that combating inflation, people should lower their cost. never shedding fiscal or -- c. he said businesses are priced housing. -- price gouging. do you think businesses are too dumb to understand to try to be lower costs. do you understand that they tried to compete by the lowest pasta, --'s -- cost possible. director swagel: trying to lower costs and sell more and help the customers. we don't have priced gouging in our baseline. >> i appreciate that answer.

can you confirm the overspending doesn't contribute significantly to inflation? director swagel: it is a mix, together with substantial demand, including from fiscal policy together with the client -- >> president's budget has imposed a massive -- propose a massive spending increase. what will they do with inflation and prices going forward? director swagel: you have inflation coming down with fiscal constraints and the action of the fed and supply challenges waiting. -- waiting --waning. we have and analyze the president's budget. -- not analyzed the president's budget. >> now recognize that gentleman

from texas. >> have done it once during the hearing. >> let me thank you for this hearing. as well as think be subject director. let me indicate to my colleagues, i am in the middle of a memorial for you body --uv alde. it is that that you live in texas. we know the nation is praying for the family so i think you for yielding to me at this time. dr. swagel, i am going to ask one answer question.

so that i can get an overview of the direction of where i was to go. let me ask the question, in your economic life as you have seen the economic impact of the pandemic, have we been through and ate the last 50 years, short of war, a pandemic of this sort with the economy was shut down? director swagel: a pandemic was unprecedented in our lifetime. >> we are looking at a economy that is in the midst of or in the aftermath of a unprecedented moment in history. yes or not? director swagel: that is fair to say. >> is the economy performing better than previously assumed in comparison to the february

2021 baseline? >> the output is -- higher and the unemployed -- unemployment rate is lower. >> that baseline was before the american rescue plan, --? director swagel: correct. >> are you accepting that there are more positives? director swagel: we have stronger economic growth and increased employment and higher inflation. the picture is complex but there -- the american rescue plan contributed to stronger growth and employment. >> have we had more jobs created in the last year -- a .3 million. -- jobs created since president biden took office? director swagel: yes, the rebound to the pandemic over the last year has led to an uncle --

i'm president increase up employment. >> the bush tax cuts that came after president clinton and the tax cuts that were done under president trump. does that create an increased deficit -- spite of the celebratory attitude of republicans? this that create a deficit? director swagel: the cdr analysis from april 2018 goes into the impacts of the 2017 tax act and we have increasing deficit. >> the good news is in a 2022, he spent a trillion dollar deficit down from 2.8 million in 2021. director swagel: that is correct. >> spite of the issue of

inflation, which we are concerned about. i working families, we are not ignoring it. he economy is moving along? -- the economy is moving along? director swagel: job creation is very strong with the marketeer. -- markets here. >> let me as an employment question and that is, we have jobs. let me mix this with, have you given an assessment. i would like an assessment of the immigration program, meaning legislation of congress that -- for ben carson, etc.. have you had that analysis -- on the comfort -- comprehensive immigration client -- plan of the inclusion of dollars to the

economy and what impact unemployment negatively? >> the cdo did a fiscal analysis for the immigration division in the build back better act. we focus on the fiscal impact. the cdo did the wider economic impact and the contributions to the economy and to jobs and culture and society. we can do it and we haven't done it for a while. are you saying we would have a positive impact? x -- three economy >> -- their children create contributions and their grandchildren. those are affected.

>> we happen to have a historic moment? director swagel: it has been. i am in solid agreement. >> thank you, mr. chairman for holding this hearing, i apologize the banking. we are fought -- finally having to work on her house after a major storm. thank you so much for the work you do. with the runaway spending coming up in congress combined with the historically expensive proposals that we have seen from the biden administration, i know you have your work cut out on the baseline in front of us. making it very clear.

costs are on the rise. the debt is passed between dollars and interest rates are rising for the baseline projection back in february for last year. 2.2 percent of average inflation and we are well past that day. democrats say the solution events -- president biden much to spend another $4.9 trillion on the bill back under -- val beck -- build back better agenda. have held a town hall in the 20 times i represent in iowa and there was a condom -- common theme that rising costs are the number one concern that i hear from my constituents. families are struggling to make ends neat and we have to get our fiscal house in order. people are struggling to fill up

their tank. the restaurant owner who seek chicken wings rise in price and they pass that on to customers. rec -- people are on a fixed -- fixed income. direct result of the decisions made the majority in the congress. when director young testified, i asked her last year, were they thinking inflation would be transitory. they said yes and they were not considering the impact of inflation. i asked her this year how they were projecting -- the administration believes it would be transient. really, it has not gone away. the baseline does say he will continue into 2023 but what does the cdo account for here as far as inflation goes at -- that the administration is ignoring?

director swagel: it is based on current law. we have just the fiscal policy in place. -- what additional upward conflict -- pressure on inflation. -- >> when you talk about this is a miscalculation and i think the american people see that it is -- when i look at this calculation by omd, it really does affect their ability to make accurate productions. that is a huge concern for me. let teachers -- what measures of the economic outlook of inflation -- does inflation impact the most? director swagel: first is the spending side. there is what we call the primary deficit, everything the government spends on and social

security benefits in the military and home health care aides. all the things the government directly or end -- indirectly spends on an inflation raise the cost of that. i inflation mates there's means and afflict -- higher inflation's higher interest rates. the net shows that the interest rates are the danger. higher inflation means worsening deficit because of higher interest rates and higher interest payments. because of -- >> because of these changes, they have impacted your print -- projections. can you tell me how those have changed? director swagel:.

-- dared to the outlook, the 10 year outlook has gone from just over 12 -- 12,000,000,000,002 14 and a half -- oh trillion 1 -- 12 trillion --to 145. --14,5 -- is what is driving the increased deficits going from 12 -- 12 trillion two 14.5 trillion. >> i now recognize the gentleman from texas. >> thank you. thank you for being here today

and talking to me earlier this year. the chairman mentioned that the budget we have before us but the hearing is late. he described it as a little late, three months is significantly late in anyone else's book. tell us again why -- we wait for the cdo baseline? director swagel: there are three different pieces to us -- it. people who have done that were busy with the analysis on build back better and between those two priorities, we cannot do the update in january. >> seems like that would be if you are trying to properly price and project the costs of a major

bill you would at least want to have your baseline set argue with these -- or you would at least prior to her -- prioritize the work for the baseline before you proceeded with another baseline project if you work to a about the impact of what you were doing. what i be wrong to think that assumption? >> try to be as helpful with policy affairs. i can go to the other two quickly. second is the fiscal year 2022 appropriations that those were delayed as well and the third is that the president's budget -- which was delayed and last

year's economic spending and the president released the budget. those three components pushed are update -- back. >> one on the white house and the congress cap you from being able to do your job. we spoke, you -- when we spoke, you suggested to me that the strength of the economy in the pandemic was stronger you had anticipated. do i understand that correctly. the economy in early 2021 compared to the forecast that we put out in early 2021 is that the economy is stronger and people were coming back to the labor markets and the impact of the fiscal policies have been a number -- undertaking -- >> this is fiscal 2021. director swagel: that is right.

it was the act enacted at the end of 2020. the rebate checks, for the past month, expanded unemployment insurance. >> another think you relayed to me was the health tax collections were stronger then you had anticipated and it looks like that that has continued. director swagel: beck continues to be the case from the economy -- there are timing shifts that the pandemic legislation, delays in taxes. beyond that, -- >> and you retort that reduction of the deficit, it is largely because of the strength of the income taxes were stronger than what you anticipated? director swagel: it is a mix --

>> how much a mix was increased tax revenues? we were told that the trillion dollar giveaway to millionaires and billing -- billionaires according to chairman sanders -- what is the deal here? director swagel: if you compare the protection we made in 2022, we previously thought it would be 1.2 trillion and that makes revenue about $400 billion charlotte that we had anticipated. -- stronger than we had anticipated. >> require -- does any of your quality -- modeling require stress testing with what is happening with the u.s. economy?

director swagel: is -- it is something we think about. we had recent work we did through senator crapo in the finance committee. what the fiscal effect of higher inflation, we look at two different scenarios and we continue to do some of that. whatwhat would it mean for the economy and fiscal situation? hopeful to have more of that. >> i hope to follow on that with you. >> i now recognize the gentleman from california for five minutes. >> thank you. dr. swagel, thank you for the updated outlook. i would like to talk to you about some of the policy solutions you have examined in the outlook and how those fit into the long-term budgetary and economic outlook that the cbo issued a few months ago. in the long-term outlook, if i

am recalling correctly, you expressed some grave concerns that by the end of the forecast period on the path that we are on that net interest outlays would exceed 8% of gdp, would consume over half of all federal tax revenue, and \ interest rates increased in response to inflation, that would get worse and sometime between now and then, something would have to be done to get the deficit done. my understanding that right -- am i understanding that right? dir. swagel: that is why. further we go out, the more challenging it gets. it will get more difficult, honestly. rep. obernolte: ok. so in this outlook we are discussing in this hearing, you examine a couple of different policy alternatives and analyze their impact on the deficit and

have a table that surmises the ones that increase the deficit, the ones that reduce the deficit. can you tell me which of those policy scenarios actually have resulted in a declining deficit? over the course of the forecast period? dir. swagel: we did a range of scenarios, with higher spending and lower spending. at the current level, it reduces the deficit. we looked just in that at just appropriations, which was not the biggest challenge. rep. obernolte: discretionary spending, i think you call it. dir. swagel: yeah. rep. obernolte: but if i am reading it right, although it reduced the deficit over the baseline, it did not reduce the deficit on an absolute basis, is that correct? dir. swagel: that is correct. rep. obernolte: ok.so let me ask again, which of these in

an absolute basis in the scenarios you late in the outlook are in deficit on an absolute basis? dir. swagel: there is one we did here. two things, when we did in this report and one we will have by the end of the year. we looked at the spending and infrastructure jobs act. by the budget rules, that gets extended out through the budget window. there is a box on page 77 in the report 3-4 that shows the fiscal impact of that. it goes through the budget rules. if that does not get extended, that would be substantial enough to reduce the armed budget. rep. obernolte: not on an absolute basis. that means that change if i am understanding right would not result in a budget deficit decreasing over time instead of increasing. is that right? dir. swagel: that is correct. rep. obernolte: the crux of what i am asking here is about why are we not examining policy alternatives that result in an

overall decline in deficit instead of an increase in deficit over time if as you say we should be so concerned about this increasing deficit? dir. swagel: no, no, i agree. it is a grave concern and we will have that for you later this year. probably december we will have a new volume that goes to a wide range of policies and will provide information on policies that change the shape of the radar. they really make a big impact on the deficit. rep. obernolte: ok. i wish that every outlook you gave us with these policy alternatives would include those, those alternatives, just to illustrate the gravity of the problem and the magnitude of the changes that are going to be required to affect that trajectory. along those lines, let me ask about something a congressman mentioned, the trust fund, the declining balance is in the trust fund. you go over that on page 125 and

126 of your outlook. you say that the outlook was prepared under the assumption that mandatory spending would continue regardless of the balance of the trust funds, but you also say on the previous page that the government has no legal authority to continue to expend anything when the balance of the trust funds is exhausted other than the revenue coming in. are those two statements -- those two statements are intentioned. i wonder, why do we do it that way? we are contradicting ourselves in the span of one page. dir. swagel: i agree there is a tension there. we are following the budget rules. it is tables b1 and b2 around the chapter you showed that try to provide that information. it is the act that requires us to do it that way. we are trying to provide as

complete information as we can to follow the law and provide additional information to show the intent of the information. rep. obernolte: i encourage you to do that in the future. my time has expired my time has expired. it will be vital for us to get this under control so we will have to take a look at the trust funds and what we will do as the balances declined and are exhausted. i would like to encourage you to include those scenarios, as uncomfortable as those conversations might be. >> i will now yield five minutes to the gentleman from new york, mr. jacobs. >> thank you very much, mr. chairman. thank you for being here. i do have to shake my head that there is a lot of celebration of a trillion dollar deficit.

i want to say i am not celebrating the trillion dollar deficit, which is one of the highest deficits we have ever had. only in washington. i wanted to first ask as we talk about the issue of inflation and the multitude of impact it has come a we talk the fact that the fed is now in an effort to combat inflation has begun raising interest rates and exultation is it will continue to do so. cbo projects a net interest payment on the debt of $8.1 trillion over 10 years. and that would be $1.9 trillion higher than previously or due to the increase in inflation that is projected. that in my mind is money that is

especially wasted because we have to because we have to pay because of inflation increases. i wonder as we talk about inflation and certainly our priority as representatives is the price of that that citizens are incurring when they go to the pump, grocery store, etc., but what is the delta you have on the increased cost on running our government and the cost that we as a government have buying everything now due to this inflation that if inflation was at in previous levels, we would not have? dir. swagel: it is an important one. the u.s. government buys a wide range of goods and services. it pays salaries, buys jet fuel, buys everything. it has an important impact on

spending. there is revenue impact as well based on wages. and the interest payments go up so that inflation has an important impact on the government. we have not looked at just that in isolation. we have looked at the net. rep. jacobs: just break down what is related to the two things, the inflation and interest rate increases, given the most recent economic data. what do you feel the likelihood of a recession is later this year, next year? dir. swagel: we don't have a recession in our projection. today, the challenge is the demand is too strong relative to supply. we have strong supply and strong demand. we have seen the impact already in financial markets. of course, there is always the

possibility of recession. we don't have in our projection. we try to be in the middle of the range of possibilities. on one side is the possibility. rep. jacobs: thank you. thank you, mr. chairman. i yield back. rep. yarmuth: the gentleman yields back. now it is up to me. i yield this up 10 minutes to questions, comments. first of all, once again, dr. swagel, in your responsiveness with the information. one thing that is important to have as part of the record is for you to briefly explain what this forecast, what this outlook is used for, why it is important. and also, i kind of have a sense that some members particularly on the republican side think you work for democrats because there

were pronouns, and maybe the pronouns were used accidentally. but talk in general about this process and why it is so important and what its purpose is. dir. swagel: thank you. we serve the congress. we work for both chambers and both sides. we are nonpartisan. we work for the budget committees and chairs and ranking members of the budget committees's jurisdiction. we adopt the work as a new baseline and provide a foundation for policymakers to look at the impact of fiscal policy, whether spending or on revenue. that is why we do it the way we do it. we try to look ahead under current law as best we can so you have a foundation on which to evaluate fiscal policy. rep. yarmuth: i know you constantly mentioned you get

disclaimers of these projections are numbers. several years ago, the secretary of the treasury appeared before the committee and paul was the chairman at that point. he was showing all these charts going out to 2075 and so forth. i asked the secretary at that point, how reliable given the pace of change in the world and all the dynamics that are involved in the world economy, how reliable do you think projections going out 30, 40, 50 years are? he said to me, i don't think projections going out more than five years are reliable. i just want what we are talking about these 10 years, i know you have to do it, but would you agree that there is a great variation in the possibilities relative to your projections at this point? dir. swagel: absolutely. as you said and the secretary said, the difficulty, it grows

as we go out over time. we understand that. we acknowledge that. even nominal dollars, the dollar in year 10 against the dollar in year one. because we do that because policymakers understand that is different from this year. we keep the baseline constant just so you have a constant benchmark. as i said before, we know our inflation forecast is too low. we lofted it in the beginning of march. we are still going to keep the baseline projection constant so this is a consistent benchmark to evaluate all proposals, both sides, both chambers. that is the key to what we do, being consistent so you and your colleagues can evaluate the merits or not of legislation. rep. yarmuth: thank you. i want to talk about inflation a

little bit because i think when we view these numbers, 8.3%, the most recent one, your projections for this year a little bit lower than that, and the comment made that it is a $5,000 tax increase for the average family. well, it really depends on what the average family does and what it is composed of. the impact of inflation on the family of six or eight is a lot different of an impact from a family of two. at one point, i know it is estimated that a third of the inflation rate was due to the price of used cars. if you are not buying a car, the inflation rate does not affect you. it is individual circumstances that are going to determine the impact of increased prices on everyone. we know everybody eats and prices are up and they have to

respond -- we have to respond to these as we can. we generalize because that is what we do. one of the questions, i know for instance everybody is saying the prices of eggs are going up. they had to kill 5 million hands because of the avian flu that did not have to do with any policy. that was an unfortunate act of nature that resulted in the price of eggs. when the pandemic started, lumber -- they stopped producing lumber because they did not think it would be a demand for it. turns out there was a huge demand for it. they were not supplying it. prices went up five or six times and now it is coming back down to a third of its highest level. but all of these components, not just to figure out what happened but also to deal with it. the actual marketplace and the decision producers made, the

shipment of computer chips impacted a lot. but republicans want to say that the american rescue plan was largely responsible for this. my question is, have you done any analysis on to what extent the american rescue plan contributed to inflation? you said it was a factor. but have you done any analysis on to what extent it was a factor? dir. swagel: we haven't. we haven't tried to parcel that out. between the mix of demands, strong demand and the supply impediments, it is both good that is the challenges. that is the changes in the market with the health and virus, we have not disentangled that. in the future, people will go back and disentangled that. dir. swagel: some have. --rep. yarmuth: some have.

the analytics say half or 30% of the total inflation permitted the fed and san francisco came up with a similar number permitted only sex came up with less than 1%. larry summers is taking credit for having predicted the inflation rate based on the american rescue plan. he basically said it was a possibility that a third would be it and if it would be none. he is taking credit for it. a lot of economists -- not a lot of economists are saying it is the lion's share of inflation we are seeing now. what people tend to forget is about 25% of the american rescue plan was essentially a tax cut. it was $1400 checks for almost every citizen in the country, in

every congressional district, on average, there was $900 million of disposable income. i think we can argue over whether that was justified or not and whether it was needed or not. but i don't think many of the hundreds of millions of americans who got that $1400 check sent it back. they were very grateful for it. i think you can make a strong case that that played a large role in actually helping the economy recover, saving businesses all over the country, and saving lives. the other thing i would say is that, and i will ask you for this, we talk about deficits. obviously, economic impact, how bad they are, what we need to do to resolve them, but by and

large, isn't it true that when the government runs a deficit that the american people run a surplus? dir. swagel: right. the government is running the deficit and the funds are going somewhere. the american rescue plan act was an illustration of that. that contributed to a wider deficit. that was used for a variety of purposes. checks to american families, combating the virus, aid for state and local governments. absolutely, the money is recycled in a good term here. used throughout the economy. rep. yarmuth: when the government once a surplus, it is taking money out of the economy. therefore, the deficit is putting money into the economy and people's pockets. the question is, what other

impacts does that have? that is obviously what we are trying to discuss here. i am not going to use the last 20 seconds except once again to thank you for being here. thank you for your work. they queue for your responses today. look forward to hearing from you again in a not so distant future.